global transformation from the inside out - optimizing the entire ecosystem

Executive ReportIBM Global Business Services Globally Integrated Enterprise

IBM Institute for Business Value

Global transformation from the inside out Optimizing the entire ecosystem

Transform operations for efficiency, effectiveness and to fund new growth

IBM collaborates with our clients, bringing together business insight, advanced research and technology to provide them with a distinct advantage in today’s rapidly changing global environment. Through our integrated approach to business design and execution, we help clients turn strategies into action. Out experience in becoming a globally integrated enterprise (GIE) comes from over a decade of transforming IBM. Our comprehensive portfolio of GIE solutions helps deliver our client’s transformation strategies and initiatives faster, at lower risk. And with global capabilities that span 170 countries, we can help deliver predictable business results from enterprise integration.

IBM Global Business Services 1

The world continues to get smaller and bumpier. As a result, many companies find themselves functioning in a global environment with an operating model designed for more limited scope. Insulated operations, lack of customer-driven vision and inconsistent communication combine to create inefficiency and waste and greatly inhibit concerted, company-wide and/or ecosystem-wide collaboration.

Many companies are finding solutions to these issues by transforming into globally integrated enterprises (GIE). A globally integrated enterprise combines global efficiencies with market responsiveness to address the challenges and opportunities that a global economy brings to an organization and its industry. The GIE operating model emerged from massive socioeconomic changes that occurred throughout the world in the 1990s, including the emergence of the Internet and the increased global footprint of multinational companies.

By Karen Butner and Dave Lubowe

Globally integrated enterprises have nearly 2X compound annual growth rate94%

more revenue growth than their industry peers63%

more pre-tax profit and pre-tax income51%

Individual business units, or functional silos, that are insulated from an overarching operating strategy have long been an inhibitor of efficiencies. But in today’s global environment, individual fiefdoms among business units and geographies can keep enterprises from realizing their potential. The answer for many is to adopt a “globally integrated enterprise” operating model. The results can be significant, as demonstrated by the high performers already on this journey. The path can be long and arduous, taking years and requiring continuous transformation. But for those companies with a global footprint, integration is a topic that can no longer be ignored: it is likely to separate the winners from the rest in the coming decade.

2 Global transformation from the inside out

Finally, we will offer recommendations about how to progress along the GIE journey, which we think of as an ongoing, continuous transformation. Some companies are just beginning, while others have taken significant steps along the way. For a globally integrated enterprise, continuous transformation is an absolute must, since no company’s position in its market is permanent.

To learn about how companies are embracing GIE and how well (and quickly) they are adopting this operating model, the IBM Institute for Business Value surveyed more than 1,000 executives around the world (see Study Methodology). Through analysis of survey responses, we found that companies generally progress in their GIE journey in an “inside-out” manner. They start with back-office, shared-services functions (e.g., Information Technology, Sales Support, Finance, Supply Chain/Operations, Human Resources) and cross-functional processes (e.g., order to pay, order to cash). As they progress on their journey, they tend to take a more external view and shift their focus to optimizing their entire ecosystem.

We also found that a group of high performers take this even further. Their focus today is on partnering across their value chains through marketing and customer-facing initiatives – with constant attention to improving and innovating the customer experience (see Figure 1). The high performers create a culture of innovation that, according to our study, greatly surpasses that of their peers.

Nearly two decades later, numerous companies still struggle with the GIE concept and continue to find themselves unnecessarily cumbersome and ineffective in dealing with new geographies, new customers, new employees and new technology. Many companies want to be globally integrated, but just are not sure of the path to get there.

In response to many requests from clients around the world, IBM has shared its own experiences in transitioning to a smarter, globally integrated enterprise.1 “For over a decade, IBM has been transforming itself through aggressive pursuit of global integration. By adopting common shared-support functions, enterprise-wide processes, a strong governance system and leveraging global skills, the company has improved client value and driven enormous productivity savings, freeing up resources to invest in growth and innovation.”2

In this report, we will:

• Look at how companies around the world are progressing toward this concept

• Demonstrate how high-performing organizations are already reaping considerable benefits from global integration

• Examine in-depth what these companies are doing that sets them apart

• Look at the obstacles that can slow down transformation, as well as those that can bring it to a screeching halt

• Provide a roadmap to more quickly realize strategies and performance objectives.


From the results of these high performers, as well as from IBM’s own experience, we have found that GIE transformation is about:

Optimizing global operations from the inside-out – Companies begin to transform operations to globally integrated services across functions and end-to-end processes. They optimize global processes and networks by simplifying and automating them. They create centers of excellence for business operations and specialized skills. They optimize processes and communications with their ecosystem (business partners, employees and customers).

Activating information with analytics for predictive insights – High performing organizations use big data to yield actionable insights that can drive competitive advantage. They develop an analytics center of excellence for widespread use. They apply advanced analytics to automate business decisions and bring fact-based insights to real-time actions. They innovate through predictive and prescriptive insight to anticipate customer responses and reactions.

Predictive analytics examines data trends, optimizes constraints and identifies potential outcomes. Prescriptive analytics uses advanced mathematics to evaluate alternatives and recommend and prioritize courses of action.

86%more

60%more

74%more

84%more

73%more

84%more

Figure 1: High performers integrate global operations significantly more than their peers

Information technology

Human resources

Supply chain

Sales support

Finance

Marketing and communications

High performersAll other respondents

IT is the highest priority investment for high performers…

…to enable aggressive transformation across many other functions

Extent of global integration across the enterprise

51%

27%

48%

30%

46%

26%

46%

25%

47%

27%

46%

25%

Source: Institute for Business Value, Globally Integrated Enterprise Study, Q4. To what extent are the following functions providing shared services across the enterprise? Globally integrated across all geographies and business units.


Accelerating organizational agility with a culture of innovation – Companies must respond to rapidly developing changes in technology, operating model/process improvement and the organization/culture. They should inspire progress through transformational leadership – leaders must own and drive the change agenda. They must align global operations with strategic intent and business objectives. And they should strive to engage and energize people – embedding social media programs into their communications strategy for employee collaboration.

As we will show in this report, those that accomplish the GIE transformation are likely to be the industry leaders. Those companies that do not embrace the transformation vision are likely to face an uphill battle for revenue, efficiency, customer loyalty and, ultimately, survival.

Study Methodology

For the IBM Globally Integrated Enterprise Study, we polled more than 1,000 senior executives with knowledge of their organization’s global transformation strategies and initiatives (see Figure 2).

• Survey completed by 1,000 senior executives

• Supported by IBM’s research partner, Oxford Economics

• Distributed and administered online

• Geographic representation from 12 countries

• More than 68 percent have a physical presence in 6-50 countries

• Executive titles included CIO, CFO, CHRO, Chief Strategy Officer and other C-suite executives, Senior Vice President/Vice President of Strategy, Finance, Supply Chain Management, Human Resources, Technology, Marketing/Communications, Sales, heads of departments and managing directors.

Life Sciences/pharmaceuticals

Electronics/technology

Consumer products

Transportation/travel

Retail

Insurance

Banking

Automotive

Industrial products

Energy and utilities

Media & entertainment

Healthcare provider

Healthcare payer 40

90

90

80

80

80

80

80

60

60

50

40

90

Survey respondents by primary industry

Demographics

Survey respondents by location

Europe

37%

Asia/Pacific

36%

North America

16%

South America

11%

Source: Institute for Business Value, Globally Integrated Enterprise Study, QD1. Please specify your organization’s primary industry. QD3. Where is your organization’s headquarters located?

Figure 2: The Globally Integrated Enterprise Study polled 1,000 senior executives on their obstacles, progression and achievements.


High performers

From our 1,000 respondents, we determined a group of high performers based on their self-assessment to the question: How does your organization’s revenue growth and profitability compare with its industry peers over the last three years?

Those that answered “significantly outperformed” to both revenue growth and profitability became our high-performer group – 10 percent of our total population (104 respondents).

We then did additional analysis. We looked up the publicly available data for CAGR (compound annual growth rate),

revenue growth pre-tax income and pre-tax profit, where available for organizations in this population (96 of 104). From Bloomberg, we acquired these same performance criteria for the appropriate industry. We then compared organizations to their industry peers and noted the performance. The chart represents the average differences between high performers and their industry peers for these performance criteria (see Figure 3).

Throughout this report, we will show what high performers are doing (what initiatives, what priorities), and achieving (what impact).

94%more

51%more

63%more

51%more

Figure 3: Globally integrated enterprises significantly outperform competitors.

Nearly 2 times compound annual growth rate

Pre-tax income

Revenue growth

Pre-tax profit

High performersIndustry peers

Global transformation is profitable and supports revenue growth

12.2%

6.3%

20.3%

13.4%

10.3%

6.3%

10.4%

6.9%

Source: Financial analysis of survey participants using publicly available data, Oxford Economics. Companies in the high-performance group compared to their industry peers/competitors. Industry peer data from Bloomberg.


Marketplace trends force companies to transform their operating modelTo understand why the globally integrated enterprise is fast becoming a requirement in today’s complex marketplace, it is necessary to first examine the forces are making such a transformation essential. Four major global trends have combined to make siloed operating models obsolete:

Globalization: Complexities in global markets, global competition for customer/consumer mindshare and wallet and increased cost structures are forcing companies to seek lower-cost structures, more flexible operating models and architectures.

Social Networks: The increasing use of social networking is changing the way individuals (employees, customers, business partners) interact and collaborate, requiring companies to development new engagement models for social business communications.

Big data: The glut of information available today is creating opportunities for real-time data analysis, addressing the need to analyze more and more data to draw business insights and turn insights into real-time decisions and action.

Demographic shifts: Global competition for talent and specific skill sets requires companies to develop effective talent management, skills and knowledge sharing to support global operations. As a result, companies are opening global centers of excellence to bring specialized, consolidated and focused expertise across business units and geographies.

But creating a transformation plan is, by itself, not enough. The concept must be owned by the entire organization – and this starts at the top. The GIE strategy and vision must be fully embraced across every C-suite function and driven down through every level of the enterprise. C-level executives must:

• Take a horizontal view of all processes and customer/consumer interactions across business units and geographies

• Instill a culture of innovation and continuous improvement with collaborative communications

• Leverage skills and competencies globally with local execution when required

• Build an enterprise-wide culture focused on customer intimacy.

GIE begins with an inside-out viewGlobalization impacts nearly every organization, no matter what industry. The first step in the GIE transformation is to look inward. As organizations expand their product/service footprints, capabilities and competencies through mergers and acquisitions (M&A), they must “rebalance” their operations to meet shifting market and customer needs. The most daunting M&A work is not the deal itself, but the ensuing integration of operations, technologies, people and culture. Associated with this “rebalancing” is the need for new digital capabilities to support Supply Chain, Finance, Human Resources and the end-to-end product lifecycle.


Higher-performing companies, much further along the learning curve, have a completely different focus – on their markets and their customers – and this shows in their results. They recognize that the customer today is in the driver’s seat and focus their resources on putting the customer first (see Figure 4).

High performers are also more concerned with the impact on operations of changing regulatory compliance requirements. And they are sensitive to increased global competition, identifying, monitoring and mitigating risk exposure.

Figure 4: High performers are externally and market focused.

Source: Institute for Business Value, Globally Integrated Enterprise Study, Q1. To what extent are the following trends impacting your company’s global operations? Q3. Which of the following are most important to your organization transforming its global operations?

Informed and empowered customer

Changing regulatory compliance

Increasing global competition

Increasing sensitivity to risk

Shareholder pressure for growth and profits


Impact on global operations: market and customer focus

69%

48%

26%

65%

64%

Restructuring sales and customer facing support

Developing operations in emerging and growth markets

Segmenting operations for differentiated markets

Top 5 impacts Top initiatives

59%

53%

46%

38%

34%

30%

25%

18%


Investment pays offAbove all, high-performing organizations are almost always under significant pressure to provide shareholders with a healthy return on investment. Almost all companies undergoing a GIE transformation are putting money back into their businesses. Unsurprisingly, high performers invest more – often significantly more (percent of annual corporate revenue).

The results are as one would expect: high performers are achieving significant positive improvement in return on their investments and other financial measurements, including revenue, cost reduction efficiencies and working capital reductions (see Figure 5).

Most important for a sustainable and growth strategy, companies are having a positive impact on the customer experience. This is the number-one category for high performers that focus their priorities on their customers and markets. Global transformation is about transforming the organization for efficiency and effectiveness. But, more important for many, it enables new growth.

Transforming the organization requires three specific areas of focus (see Figure 6). We will explore each of these in-depth in the following sections.

Figure 5: High performers’ investments in transformation have returned superior performance.

Customer experience

Return on investment (ROI)

Efficiency/productivity

Working capital

Revenue

Cost reductions


All companies report on average 47% significant positive impact from their transformation initiatives.

High performers report significant returns on their investments in all categories.

The greatest impact area for high performers is the customer experience.

Significant positive impact

81%

49%

80%

45%

75%

48%

75%

51%

73%

44%

72%

43%

Source: Institute for Business Value, Globally Integrated Enterprise Study. Q16. How would you evaluate the impact of your organization’s global integration initiatives? Response 5, 1-5 scale.


Optimizing operations globallyCompanies tend to prioritize their transformational initiatives. Most begin with creating shared-service environments and organizational competencies. Shared services can be defined as consistent worldwide processes in which redundancy and inefficiencies have been eliminated.

Our survey reveals that companies are creating shared services in all of their major functions. Many companies, in fact, are creating a globally integrated, common shared-service

Optimize operations globallyReinvent processes and integrate functions, removing complexity and uncovering new efficiencies

Activate information and analyticsImprove business performance across all functions with data-driven insights

Accelerate organizational agilityInfuse speed, flexibility and collaborative behavior into the organization to capitalize on market opportunities

Globally Integrated EnterpriseTransforming the organization for efficiency, effectiveness and to enable new growth

Figure 6: Global transformation requires optimized operations, activated information and accelerated organizational agility.

Source: IBM Global Business Services; Globally Integrated Enterprise Center of Excellence.

capability that spans all business units and all geographies, including Information Technology, Human Resources, Supply Chain, Sales Support, Finance, and Marketing and Communications.

The next step for many (but not all, since the GIE roadmap is unique to each company) is to begin standardizing, integrating and optimizing cross-functional processes, including: opportunity to order, purchase to pay, product lifecycle management, integrated sales and operations planning and business partner enablement and integration.


Companies are creating centers of excellence in which specialized skills and expertise are closely aligned. These centers can be virtual or physical and provide economies of scale in serving multiple business units across geographies. Examples include customer experience centers, service centers, research and development centers, analytics centers of expertise and legal centers.

The impact of these transformational efforts is significant across all areas of the business. The most significant impact is in Finance, Human Resources and Marketing/Communications, with Information Technology, Supply Chain, and Sales Support following. The greater degree that companies are globally integrating functions, the greater significant impact they are achieving (see Figure 7).

When we look at the high performers, we see how much more impact they are achieving in each area. These companies are investing more and receiving significant return on their investments. They have an outward – customer and market – focus as opposed to an inward, process integration and improvement perspective.

Key findings and recommendationsFinding: High performers globally integrate operations up to 86 percent more to achieve significant impact.

Recommendation: Transform operations to globally integrated services. Start with creating global impacts that have an internal innovation and integration focus (M&A, supply chain) and then move to those for value chain and competitive differentiation (restructuring sales/customer support and aligning operations in emerging markets). Impact includes greater return on investment, compound annual growth, profitability and revenue growth.

Figure 7: Companies are transforming duplicative functional silos as shared services to be integrated across business units and geographies.

Source: Institute for Business Value, Globally Integrated Enterprise Study. Q4. To what extent are the following functions providing shared services across the enterprise? Q18. What has been the impact of your global transformation initiatives on the following business functions?

FinanceHuman resourcesMarketing and communicationsInformation technologySupply chainSales support

Impact of global integration

High performersIndustry peers

The greater degree that companies are globally integrating functions across business units and geographies, the greater significant impact they are achieving.

Impact 100%

80%

60%

40%

20%

0%0% 20% 40% 60% 80% 100%

FinanceHuman resourcesMarketing and communicationsInformation technologySupply chainSales support

Global integration


Finding: Cross-functional process integration starts with internal efficiency and progresses to external collaboration.

Recommendation: Optimize global processes and networks. Focus on higher-value, collaborative processes (sales and operations planning and business partner enablement). Optimize labor, costs and data. Leverage the globally integrated services to scale in new emerging and growth markets. Segment operations to meet local customer and market requirements.

Finding: Centers of excellence are customer-focused.

Recommendation: Shift to an outside-in, customer operating model. Develop centers of excellence to concentrate skills and assets to best engage and serve the customer. Move work to where it can best be performed. Optimize labor and delivery models to reduce costs while focusing resources on high-value support areas.

Activating information and analyticsAnalytics is increasingly recognized as an essential driver of future success. Therefore, it comes as no surprise that applying analytics to big data is a mandate by 66 percent of the executives participating in our study. High performers go even further: 88 percent have executive mandates to infuse analytics into their technology and operational business insights to make better and faster decisions.

Those that are pursuing analytics strategies are reporting positive results. In our study, 90 percent of respondents reported that they are realizing competitive advantage through the use of analytics. And over half say that analytics provides a significant competitive advantage. These companies are realizing meaningful results, especially in sales and marketing effectiveness and in identifying new market opportunities. They are also gaining benefits through cost reductions and productivity efficiencies as a result of global integration and optimization.

Radical transformation lets Unilever Europe focus on growth

Facing soft top-line revenues and an elevated cost structure, Unilever Europe needed to make dramatic operational changes. Over the years, Unilever Europe had expanded in a siloed fashion, by country and division. As a result, this well-known consumer products giant had become a loose federation of business groups and geographies operating across 24 countries, all using multiple ERP systems. With so many different finance and accounting processes under three separate leadership teams, the result was a complex, inefficient organization that impeded growth.

The leadership team made a strategic decision to integrate the company’s multiple business units into a single, unified Pan-European organization, but needed to implement the systems and framework to enable this goal. The diversity of cultures, policies and language across Europe further complicated the challenge, as did the varying levels of technology across the company’s business units, which ranged from advanced to outmoded paper-based systems.

In a bold move, the company implemented a total business transformation initiative with an aggressive two-year timeline called “one Unilever,” resulting in a common operating model enabled by single Enterprise Resource Planning program across Europe that encompassed outsourcing initiatives in Finance, as well as IT and HR.

As a result, Unilever Europe was able to accelerate the path to finance and administration transformation, accomplishing in less than four years what has historically taken other companies as many as 10 to 15.3


Most companies are using analytics primarily to gain customer insight. Inventory management and financial decision making are also high on the list. Many companies are using predictive analytics to analyze data trends, optimize constraints and predict outcomes. Our subset of high performers continues to push the envelope. Many are using prescriptive analytics, which entails using advanced mathematics to provide insight in evaluating alternatives, as well as recommending and prioritizing courses of action (see Figure 8).

The small minority of companies, 10 percent, that say they are deriving little benefit from analytics cite lack of leadership, lack of skills and poor data as primary reasons. For example, 52 percent of this minority say their organizations suffer from poor data quality; 47 percent say the organization is not able to leverage analytics effectively; 44 percent claim they lack the necessary skills and capabilities and 44 percent say their leadership does not understand the potential value of analytics.

Figure 8: High performers advance further with prescriptive insights.

Customer information

Productivity analysis

Inventory management

Sales support

Risk management

Supply chain and operations

Financial decision-making

Demand management


Although all companies are using analytics for customer information evaluation and insights, the high performers are standing out in their use of prescriptive analytics for customer information analysis.

Prescriptive: Using analytics to make a recommendation or automate a response to an event

73%more

58%

33%

52%more

46%

30%

16%more

37%

32%

15%more

37%

33%

8%more

29%

27%

44%more

46%

32%

Source: Institute for Business Value, Globally Integrated Enterprise Study, Q8. For each area, indicate all uses that your organization makes of analytics to support business insight for global operations.

54%more

45%

29%

53%more

39%

25%


Key findings and recommendationsFinding: 90 percent of respondents achieve competitive advantage with analytics. Widespread use of analytics typically reduces costs that can then be invested in market- or customer-facing initiatives.

Recommendation: Gain the potential for competitive advantage by developing a center of excellence for business analytics serving all business units. This enables the organization to reduce enterprise cost, improve productivity and optimize operational performance. Analytics enhances competitive advantage in the market through sales and marketing effectiveness, product/service development and bringing insights to identify future market opportunities.

Finding: Two-thirds have a top-down mandate to infuse analytics into their global operations.

Recommendation: Build analytics into global operations for business insight. This is a top-down mandate by the senior executive team and requires automation and optimization of previously transformed shared services, cross-functional processes and customer/business centers of excellence.

Finding: Customer information is the top priority for predictive and prescriptive analytics.

Recommendation: Use analytics in all functions and advance from trend and historical analysis to predictive and then prescriptive solutions. Prioritize customer information for prescriptive analytics. Analytics can be applied to identify emerging market risks to enable proactive actions.

SSGC mitigates business risk through better insight into supply and demand

Sui Southern Gas Company (SSGC) in Pakistan wanted to improve its ability to track and predict changing patterns of supply and demand for natural gas to its 2.2 million customers, and to reduce the loss of gas through leakages and theft. Without a single comprehensive source of reliable data or a consistent set of analytical tools, the company was expending considerable time and effort on manual reporting that offered limited value to business managers.

To manage its transmission and distribution networks, SSGC had more than 5,000 paper maps, and was steadily adding new maps as the scope of its operations grew. The day-to-day handling, storage and maintenance of these maps were a significant drain on resources. More important, the information they contained was outdated almost as soon as they were created, and there was no consistent scale or format for the maps. Reconciling operational data with mapping data to get a clear picture of supply and demand issues was practically impossible: not only were the maps inconsistent and difficult to use, but also there was no single source of reliable data.

SSGC deployed an innovative business analytics solution that overlaid digital maps with real-time operational and financial data. This enabled SSGC to visualize and analyze data in a real-world context.

User-driven reporting with real-time data updates has replaced the laborious, time-consuming creation of static reports. Different views and dashboards are provided to each type of information consumer within SSGC. With a single trusted version of information, and the ability to geo-reference data, SSGC has a scalable integration platform to handle the variety of data and dramatically improve the speed and clarity of its insight into supply and demand issues.4


Accelerating organization agilityThe pace of change in today’s world continues to accelerate. As more information becomes available, as customers become ever more demanding, and as technology creates new and more intimate opportunities for engagement – both internally and externally – the global transformation agenda must be continuously reinvented to maintain competitive advantage.

The organizational changes necessary to compete in a transforming world are numerous. Many organizations must embrace big data and improve their insight through analytics. They must take advantage of new opportunities, such as cloud technologies. They must transform processes to include

automation and adopt new operating models to more efficiently and effectively gain and retain market share. Organizations will require a new set of skills adapted to the changing environment. They will need to focus on collaboration and communication, both inside the organization and across the entire ecosystem. And, most important, they must reinvent corporate culture to foster an open and adaptive environment (see Figure 9).

With the necessity of change, companies must examine the numerous barriers that stand in the way and devise strategies to overcome them. According to our study respondents, a lot of work remains to align the organization to capitalize on opportunities.

New technology/infrastructure/cloud

Automation of key processes

Adopting new business models

Developing skill sets and capabilities

Improved data analysis with analytics

Process or functional restructuring

Increased internal/external collaboration

Reinventing our corporate culture

New metrics and success criteria

Organization restructuring

35%

34%

33%

33%

33%

32%

27%

24%

24%

38%

Biggest changes in the global integration agenda

Technology is about big data – improved insights with analytics, with forward views on new technology, such as cloud.

Future process transformation will include new business models, automation and adoption.

The organization requires skill alignment, increased collaboration and a corporate culture of reinvention.

Figure 9: Great change is ahead in technology, business model/process improvement and organization/culture.

TechnologyBusiness Model/ProcessOrganization/Culture

Source: Institute for Business Value, Globally Integrated Enterprise Study, Q12. What are likely to be the largest changes to your company ahead on your global transformation agenda?


Inherently, organizational culture is resistant to change. Effectively transforming culture requires top-down commitment that permeates every level of the organization. Organizations without the discipline to sponsor and encourage change will likely struggle.

In the globally integrated enterprise, geographical issues also arise. Particularly, geographical units often want to keep control of their individual operations, rather than embrace the global strategy. Disagreements may surface on performance metrics. For example, individual units may not want to accept end-to-end process metrics, but instead keep siloed metrics in place for individual performance ratings. Differences in vision between business units can result in organizational paralysis.

High performers have found ways to tear down the barriers (see Figure 10). Their senior leaders have the skills and discipline to drive change across all levels of the organization. A senior executive owns the transformation change agenda. At IBM, for example, there is a Senior Vice President of Enterprise Transformation who oversees all global transformation initiatives.

High performers also address culture, the biggest barrier to transformational change. First, these high performers ensure strategic alignment of the enterprises’ business objectives and key performance targets. They make sure that the transformation agenda is prioritized and focused on meeting the agreed-upon executive objectives and strategies. They create a culture that is agile and adaptable to change.

Next, high performers encourage innovation and a culture of reinvention through the enterprise. They communicate a spirit of innovation to all of their employees and encourage forums for collaboration and discussion. They are also fostering the empowerment of employees (at various levels throughout the organization) to make fast and informed decisions.

Companies successful at global integration use social networks as a major enabler of transformation. Social networks are used to communicate – strategies, initiatives, teams, communities of like interest, and more. In real-time, teams can be formed around the world to solve a problem or collaborate on an issue. Decisions can be made rapidly and implemented even faster. The culture of the globally integrated enterprise not only encourages the use of social networks, but also has mandates for its use and training available to all employees.

46%more

50%more

Figure 10: High performers are preparing for the change ahead.

Leaders are prepared to manage the transformational change

And have been successful at managing change in the past


Change readiness

69%

48%

69%

47%

Source: Institute for Business Value, Globally Integrated Enterprise Study, Q2. To what extent do you agree or disagree with the following statements? Our leadership is prepared to manage transformational change. Our company has been successful at managing change in the past.

Their executive team is ready to manage the change ahead . . . and have successfully done so in their journey thus far.

They have created a culture that is agile and adaptable to change.


Key findings and recommendationsFinding: Greatest barriers to transformation success are leadership, culture and change, cited by more than two-thirds of study respondents.

Recommendation: Inspire through transformational leadership. Future transformation includes big data, with improved analytical capabilities, new technologies, such as cloud, new operating models and automated processes. Transformation leaders must own the change agenda. Create a management system that integrates leaders across geographies and products to focus on business performance alignment and customers.

Finding: High performers create a culture-driven enterprise ready for innovation and change – 50 percent more than others.

Recommendation: Foster a culture that embraces continuous change. Improve outcomes by establishing a rigorous culture of innovation with attention on real insights, aligning skills and deploying common methods and tools to ensure organizational readiness, engagement and value. Launch a change management center of excellence to provide leaders with organizational change management advisory services.

Finding: Employees embrace use of social networks, especially high performers, 43 percent more than others.

Recommendation: Engage and energize people. Embrace social media programs into the communication strategy. Utilize collaboration tools for interactive discussions about employee programs, new technologies and operating model changes. Leverage cloud technologies for rapid scaling and self-service.

Regeneron: Keeping the cultural cornerstone through scientific discovery

Regeneron Pharmaceuticals, Inc. is a fully integrated biopharmaceutical company, based in Tarrytown, N.Y., that employs more than 1,700 people. When Regeneron collaborated with Sanofi to develop new drug candidates using Regeneron’s human monoclonal antibody technology, the company was faced with an extraordinary staffing challenge: to fulfill its agreement with Sanofi, Regeneron needed to quickly hire more than 350 employees, primarily in research and development. However, hiring so many highly trained scientists is no easy task. Great scientists are typically hard to land because the very best are in high demand.

Regeneron engaged a partner to study the culture of the company, develop a plan to hire employees who would thrive in the organization, and come up with a solution to attract a large number of scientists. Once the company’s culture was uncovered, the information was used to develop a simple set of value statements that described the employees of Regeneron and, as it turned out, the employment brand of the company.

The results: Regeneron grew its employee base over 50 percent the first year and nearly tripled in size in four years. 5


Transformation from the inside outFor many companies, especially those not long into their transformation journey, the focus of their global transformation initiatives is on merger and acquisition integration, optimizing business processes, and aligning their people – talent and skills – appropriately around the world.

The high performers in our study are doing these things as well. But they are also focusing their attention on their customers and their markets. Their key initiatives are restructuring sales and customer-facing support processes, developing operations in growth and emerging markets and segmenting operations for differentiated markets.

As companies progress in their transformation journey, from shared to globally integrated functions, cross-functional processes, and centers of excellence, they achieve significant impact. The more globally integrated their functions become, the greater the impact that they are achieving, as evidenced by the high performers in our study. High performers are on average 60-80 percent more globally integrated than the other respondents and are achieving significantly higher results – from 35 percent more impact in Information Technology to around 45 percent in Human Resources, Finance and Supply Chain.

To recap, global integration begins with an inside-out focus; it begins internally and, as capabilities grow, extends across the entire ecosystem. For those global companies that wish to increase efficiency, enhance productivity and have a better view of their customers, the transformation to the globally integrated enterprise operating model is not only desirable, it is rapidly becoming a necessity.

Where is your company in this transformation journey? Following are some questions that can help you benchmark your progress:

Optimize operations globally• Have you created globally integrated shared services across

business functions?• Have you developed centers of excellence for customer/

consumer briefings and specialized skills/competencies?

Activate information and analytics• Are you gaining competitive advantage by applying analytics

to global operations?• Is infusing analytics for business insight a top-down mandate

by the senior executive team?• Are you modeling the business with predictive and

prescriptive analytics?

Accelerate organizational agility• Does a senior executive own the company’s transformation

agenda?• Do you foster a culture that embraces continuous change?• Are your employees engaged broadly in the transformation

– using social networks to communicate and collaborate?

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References

1 http://www-935.ibm.com/services/us/gbs/thoughtleadership/ibmtransformation/

2 Ibid.

3 “Unilever Europe: Radical transformation lets Unilever Europe focus on growth and winning in the marketplace.” IBM. 2012. http://public.dhe.ibm.com/common/ssi/ecm/en/gtc03035usen/GTC03035USEN.PDF

4 “SSGC mitigates business risk through better insight into supply and demand.”IBM. April 25. 2012. http://www-01.ibm.com/software/success/cssdb.nsf/CS/STRD-8TMM28?OpenDocument&Site=default&cty=en_us

5 “Regeneron: From experiencing exponential growth to keeping the cultural cornerstone through a very scientific discovery.” IBM. January 2014. http://www-01.ibm.com/common/ssi/cgi-bin/ssialias?subtype=AB

Please Recycle

GBE03600-USEN-00

About the authors Karen Butner serves as the Global Leader Research and Thought Leadership, Strategy & Analytics for the IBM Institute for Business Value, the business think tank of IBM. Her focus areas of research are Globally Integrated Enterprise, Operations and Supply Chain, Sustainability and Risk Management. In this role, she is responsible for market insights, industry trends and thought leadership development. Karen is frequently invited to keynote at international conferences and is widely quoted in leading business and industry publications. She has over 25 years of experience in strategy development and transformation. Her passion is to assist clients in the development of strategies and improvement agendas to bring significant value in transforming their global performance. She can be reached at [email protected].

Dave Lubowe is a Vice President and Partner in IBM Global Business Services’ Strategy & Analytics practice, and is the Global Leader for Operations & Supply Chain consulting. Dave has over 30 years of industry and consulting experience, primarily in operations management and large scale transformations. His consulting work has focused on designing, implementing, managing and continuously improving business processes, including extensive experience with managing outsourcing effectively. He can be reached at [email protected].

IBM Institute for Business ValueIBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues. This executive report is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to [email protected] for more information.

ContributorsBrian Goehring, Associate Partner and GIE Center of Excellence Lead, IBM Global Business Services

Jim Phillips, Writer, IBM ITSO Global Content Services

Kristin Biron, Designer, IBM ITSO Global Content Services

Steve Ballou, Director, IBM Institute for Business Value Research Hub

Kathleen Martin, IBM Institute for Business Value Research Hub

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